Business

Blockchain is not pure evil

Blockchain-based play-to-earn (P2E) games stole the show in 2021, exploding from a fringe hobby into a large chunk of decentralized space. They even helped people in developing countries put food on the table, as the economic models of these games don’t shy away from things like farming in-game currency and items to resell to other players, which many non-blockchain massively multiplayer online -Games (MMOs) do ) frown, to say the least.

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The mainstream gaming industry took notes as the P2E rocket ship shot to the moon – and its flight has left the industry bitterly fragmented. On one hand, top executives from leading gaming companies like Ubisoft and Square Enix have their eyes on the new market, seeing new business models, new revenue streams, new monetization opportunities — and telling investors they’re into something the cool kids always can collect some bonus points.

Related: Play-to-earn games herald the next generation of platforms

On the flip side, however, players themselves were less than impressed, and hit out at blockchain initiatives even from popular developers. Developers aren’t rushing to embrace the novel technology, it seems: about 70% of game developers have no appetite for blockchain or crypto, a major recent survey showed. This also means that 30% are more or less interested, but overall sentiment is negative.

Interestingly, the survey included some of the concerns developers had about building games on the blockchain. These largely amounted to all of the regular criticisms that the crypto community has long become accustomed to – the environmental impact, scams, and monetization concerns. Well, let’s get things straight again, this time with a special focus on the gaming world.

No, blockchain does not have to set the earth on fire

Blockchain’s environmental impact is the least hanging fruit for a critic, but at this point it probably has more to do with the industry’s perception than its actual state of affairs. Yes, it is true that Ethereum, the second largest blockchain by market cap, has a high carbon footprint due to the use of Proof-of-Work consensus mechanism – but nothing compels you to develop on Ethereum at all.

Related: How blockchain technology is changing climate protection

It’s no secret that sustainability is one of the main fronts in the DeFi battle for Ethereum’s throne. Several other blockchains, from Cardano and Avalanche to WAX and BNB Chain, are flaunting their low energy consumption to attract greener development teams. Blockchain gaming is no different, and the vast majority of game developers base their projects on eco-friendly chains.

Admittedly, the main reason for building on Ethereum is that you are entering a developed ecosystem worth nearly $310 billion, which is more promising for your bottom line than moving to one with a lower market cap. That being said, cool projects bring more people and transactions to any blockchain network, which drives up the token price and market cap. With dozens of chains supporting the Ethereum Virtual Machine, which is the runtime environment for smart contracts, developers will find it easy to migrate their apps back to Ethereum once the network is fully proof-of-stake.

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In addition, developers can go one step further and integrate sustainability into their economy by design. They can hardcode royalties to carbon offset providers into their NFTs and tokens, and commit to being green in the strictest possible way. Finally, energy and finance are already aggressively pursuing carbon credits, so it might make sense to pursue a similar strategy as part of a broader push for green decentralization. Sure, that would eat into the studio’s revenue, but sustainability pays off.

No, blockchain is not just about fraud

Crypto has a scam problem – this is undoubtedly true. Last year scammers, scammers and hackers got away with $14 billion worth of cryptocurrencies. Crypto scams come in all shapes and sizes, including rug pulls, social engineering, and pump-and-dumps. Anyone entering the space should be aware of the potential risks, that’s for sure.

Related: Beware of sophisticated scams and rug pulls as criminals target crypto users

However, the mainstream gambling industry also has a fraud problem, and it has indeed peaked in 2021, as noted by Lloyds Bank. COVID-19 has brought more people and money into gaming, and scammers go wherever money flows, using all tried-and-tested techniques, from phishing to malicious third-party sites claiming to offer free in-game offer currencies. At the same time, the survey revealed that only 8% of players had seen tips on how to spot cheaters.

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Both industries also have instances of questionable behavior on the developer side. From crowdfunded projects sitting for years without updates to early releases being sold on Steam without ever seeing any further development, the mainstream stage is not without scammers. On the crypto side, there are similarly developers who are disappearing with the money raised through token sales and other scams.

All in all, cheating can happen in any area that contains something of value, be it a magical sword that will help your game character deal with those pesky dragons or, say, real estate. For both crypto and mainstream gaming, education has an important role to play in eliminating cheating. Developers working on blockchain projects should take care to teach gamers the ABCs of cheating at every opportunity.

At the same time, the crypto space offers additional protections against fraud. When integrating with decentralized services like exchanges or yield farms, developers can verify their code on-chain since it is openly available. You can also use the maturity and market cap of certain protocols as a measure of their safety, as both indicate greater investor confidence and more robust protection.

No, blockchain is not bad for monetization

The concern about possible monetization problems seems a bit misplaced at first glance. Blockchain was designed from the start as a protocol for transferring value, which is more conducive to monetization efforts. A P2E game must of course contain a strong economic component that allows both players and developers to generate profits.

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At the same time, there is a problem here. Every blockchain game becomes part of the larger ecosystem. This ecosystem is inherently turbulent, volatile, and speculative, and these are risks both players and developers must be willing to even get into the business. Here’s a quick example: To play an NFT game, you typically have to pay the upfront cost of purchasing your NFTs. In order to be able to do this, you must first buy the native token of the chain the game sits on, meaning you are exposed to its fluctuations, which are also present if you wish to cash out later by selling your NFTs. Similarly, all fungible tokens in play will inevitably rise and fall in value with the overall crypto market. Or will they?

Again, the answer depends on the choices the developers make. The studio may choose to build the game’s economy around a stablecoin whose value does not fluctuate over time despite the crypto market’s rollercoaster ride. The reason teams rarely do this is because they are looking for a token economy that will skyrocket quickly, which is only possible with a more dynamic coin. It also carries the risk of additional instability on top of general crypto market movements, as an economy built this way can collapse once the token tips over or player base growth slows.

Related: The Cointelegraph Research report analyzes GameFi’s 2021 bumper and trends for 2022

However, developers can avoid this problem by being more creative with their monetization. They can leverage the programmable nature of blockchain tokens to algorithmically control their price dynamics, burning and minting them based on demand and broader market swings. At the same time, they can add indirect monetization through secondary market fees on NFT sales, which would effectively lead to an endless revenue cycle and align their interests with those of users. When developers release NFT content that players want, they can reduce any subsequent resales, compensating for what they could have earned by driving up the price of their token.

Like any other technology, blockchain is not inherently good or evil. It’s a protocol with its own design flaws that savvy developers can mitigate through smart design decisions. While not every game needs to include decentralized technology, there’s nothing wrong with experimenting with the value that blockchain brings to game design, and doing so in a safe and sustainable way is primarily a matter of choice.

This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Adrian Krion is the founder of the Berlin blockchain gaming startup Spielworks with a background in computer science and mathematics. He started programming at the age of seven and has successfully combined business and technology for more than 15 years. He is currently working on projects connecting the burgeoning DeFi ecosystem with the gaming world.